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Although China is slowly returning to pre-outbreak activity, the same cannot be said for the rest of the world, which is grappling with the Covid-19 outbreak, with a fifth of the global population and counting under lockdown. Average blast furnace activity in China is recovering but iron ore demand from outside China is expected to decline while blast furnace activity drops amid the spread of the coronavirus. Several steel producers in Europe as well as Nippon Steel in Japan are cutting production.

Similar dynamics are evident in the metallurgical coal market. China’s demand for coking coal is set to recover in the coming months as steel mills resume operations, while demand in India, for instance, is expected to weaken, with shutdowns taking place in several states in a bid to contain the spread of the virus. Activity in Japan and South Korea is also likely to be reduced. The European steel industry is under pressure while countries face ever-tighter restrictions.

As for iron ore supply, the aftermath of the Brumadinho dam disaster as well as the heavy rains in Brazil have tightened the supply of seaborne cargoes and kept prices at higher-than-expected levels. The market received further support after the latest announcement from Anglo American - the company is investigating the potential impact on iron ore exports if South Africa follows the long list of other countries implementing a lockdown. The coronavirus pandemic may disrupt the seaborne iron ore supply infrastructure and shrink the seaborne volumes available in the near term, providing further upside risks to prices.

In the coking coal market, supply woes will likely continue to outweigh the coronavirus implications for demand in the near future as well, but in a broader picture Australia's greater reliance on China may adversely affect prices. In the Chinese ferrous scrap market, signs are emerging that demand is starting to pick up, with electric-arc furnace (EAF) operating rates beginning to return to normal levels following sharp drops earlier this year. In the meantime, obsolete scrap collection and prime scrap generation has been depressed amid the pandemic.